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Critics sing in unison against Universal bid

The move would consolidate representation of artists including Katy Perry. | AP Photo

The Universal-EMI deal will reduce the market “from four to three players,” said Rae-Hunter, who is also a musician and operates an independent label.

That has some public interest groups likening the deal to the aborted AT&T acquisition of T-Mobile, which would have reduced major wireless carriers operating nationwide in the U.S. from four to three. U.S. regulators moved to block that deal late last year and the companies just beat it.

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“It violates the merger guidelines by a mile,” said Mark Cooper, research director at Consumer Federation of America. “EMI-Universal would be big enough to make or break the markets.”

Musicians are no longer singing about making money for nothin’ as the business has been under pressure from consumer migration to digital formats. Rampant online piracy has been burning down the house, the industry says.

Around 13 percent of Internet users download songs from file-sharing services and only 37 percent of music is legally acquired , according to market research firm NPD. And the recording industry is half the size it was compared with 1999 — when Napster was born — falling from $14 billion in 1999 to $7 billion in 2011, according to the Recording Industry Association of America. The trade group attributes that decline to both digital and physical piracy.

One of the main arguments critics have against the deal centers on whether consumers can listen to the music on new digital services if Universal gains a larger share. “If they don’t like a digital distributor, they don’t like a business model, by withholding their content they could make it impossible for that business to get into the market,” Cooper said.

Notwithstanding the power it wields, Universal was the second major label behind EMI to ink an agreement with Google’s new cloud music service this past fall. Warner has not secured a deal with the Google service. It was also the first label to sign a U.S. deal with music-streaming service Spotify.

Warner also has previously made bids for the storied EMI Group, which is based in London and has roots going back to the advent of recorded sound. In 2000, Warner and EMI withdrew their merger proposal because it couldn’t clear the European Union. Warner bid for EMI again in 2007 but lost out to a massive bid from private-equity firm Terra Firma, which ultimately ceded control of EMI to Citigroup last year.

Citigroup, after a protracted auction, announced in November that it would sell EMI’s recorded-music unit to Vivendi SA’s Universal Music Group for $1.9 billion, while EMI’s publishing operation — which deals with copyrights of musical compositions — would be sold to a consortium spearheaded by Sony Corp.’s music division for $2.2 billion.

The FTC will be looking to determine whether a high concentration in the market would lead competitors to collude on pricing or leave the combined entity with “so much market power it will be able to call its own shots without having to worry about competition,” according to Bert Foer, president of the American Antitrust Institute. The think tank has been lobbied by Universal and Warner but has yet to take a stand on the deal.

On March 23, the EU’s antitrust regulators opened an in-depth investigation of both deals. The European Commission now has until Aug. 8 to make a final decision on whether the proposed transactions would significantly impede effective competition in the European market.

“The [EC] needs to make sure that consumers continue to have access to a wide variety of music in different physical and digital formats at competitive conditions,” Joaquín Almunia, the EC’s lead competition official, said in a statement.

Universal’s LoFrumento said there were no surprises and the opening of the investigation was “always expected.”

“We recognize that the [EC] needs time to fully review this transaction,” LoFrumento said in a statement. “We will continue to cooperate fully with them and look forward to a successful resolution of the process.”

Breaking up is hard to do, but Universal Music is in talks to sell three music-publishing catalogs, including classical, Christian and German music. Universal said this past November that it would sell nonstrategic assets to help finance its purchase of EMI.

Some consumer groups argue that the company may need to wave the white flag and make similar divestitures in recorded music holdings, if the deal is to go the distance with regulators.

In the meantime, Washington lawmakers and regulators will be hearing different tunes from rivals on the impact of the proposed music merger.

Readers' Comments (6)

Music in America has been dead for 20 years now. It's not music corporations fault, it's the consumers fault for accepting such commercialized trash like Lady GaGa and Katy Perry. If you go beyond the airwaves of the United States, you'll hear amazing talents who compose their own music and write their own lyrics. Some of my favourtie artists of many genres are from Europe.

LOL. The thing about the "democratization" of music is... kids between 13 years old and 25 years old account for something like 90% of all music sales.

That's just pop music. There's nothing special about any era of pop music since the innovation of rock 'n roll, period.

There has been more innovation in the technology that is used to make and record music than in musical forms themselves. Any real innovation in form occurs on the fringes and by virtue of its market base leaves an impression on very few people, and you would never even hear about artists exploring new musical forms if pop artists who have mostly not changed much at all didn't incorporate, water-down, and adapt those ideas to a pop format, and thus... form is mostly frozen.

There is no significant evolution because every 13-25 years you have an entirely new consumer base. So something highly derrivative of something 20 years ago gets to be brand new all over again.

To quote the late Frank Zappa, "We are caught up in ever decreasing cycles of nostalgia. Soon we won't be able to take a step forward without reminiscing about the step we just took".

When are people going to understand that the only monopoly that is dangerous is the government monopoly on deadly force?

First of all, this isn't even a monopoly! It's not even half of the industry, so what are people complaining about? There should be no critics of this deal, even under their contrived principles.

And second, the notion that monopolies are dangerous is a complete and utter farce. In no way whatsoever do monopolies hinder the free market. Critics only have imaginary scenarios that have no basis -- and more importantly, no example -- in reality. Monopolies are incapable of hindering competition in an unregulated free market since there is nothing prevent someone else from either trying to do what the monopoly does better or offering a different competing product or service. But in a regulated non-free market, monopolies leverage regulations passed by the government (which in all practical purposes the monopolies write themselves and just hand over to the legislators) to prevent this kind of competition.

The danger isn't the monopoly in the market, the danger is the government which has the monopoly on the power to kill anyone who doesn't do what they order.

"The consolidation of musical talent under one corporate roof — Lady Gaga and Katy Perry"

If Lady Gaga is "musical talent," then it might as well be under one corporate roof.

European music isn't much better.

Fortunately, having grown up in the middle of the Pacific Ocean, my tastes include all of the Pacific Rim countries. If you get past the language issues, some of the best music of today is coming from Asia. "Talents" really ARE talented. As I type, my daughters are listening to the latest Girls Generation CD (a Korean group, and my girls are dying to see them in concert again) and in the car this morning I was listening to Lea Salonga.

When you have outlets such as YouTube, where aspiring artists can get worldwide attention without being involved in the industry at all, I'd say that there's no way for Universal to become a monopoly -- and as far as I'm concerned, Universal is welcome to pretty much the whole US music industry (exceptions being the Blue Man Group, Society of Seven and others -- who are all outside the mainstream anyhow).

When are people going to understand that the only monopoly that is dangerous is the government monopoly on deadly force?

Youngrightwinger, you may want to do some more reading and better educate yourself. One of the great Teddy Roosevelt's nicknames was the "Trust Buster," precisely because monopolies in fact hold the potential for great danger. Teddy's willingness to thwart the robber barons saved the USA!

On the other hand, the nation is no peril if what's left of the record business is further monopolized -- we'll just be stuck with more banal music for a while longer. The music companies are doing a fine job of driving themselves further into oblivion. These companies insist on sticking with a broken business model of overpricing their product, while millions upon millions of music listeners simply say, "no thanks," and download music for free. Eventually the old record companies will meet their end, and technological innovators will offer good music for a fair price.

When are people going to understand that the only monopoly that is dangerous is the government monopoly on deadly force?

Youngrightwinger, you may want to do some more reading and better educate yourself. One of the great Teddy Roosevelt's nicknames was the "Trust Buster," precisely because monopolies in fact hold the potential for great danger. Teddy's willingness to thwart the robber barons saved the USA!

Teddy Roosevelt wasn't "great", he was quite the opposite. He was a far-leftist busybodied PROGRESSIVE who detested liberty. And you do an EXCELLENT job of proving my point and invaliding yours. You say that "monopolies in fact hold the potential for great danger"; aside from the fact that this is hilariously irrational -- the Windows Operating System in DANGEROUS ooooooooooo BEWARE ooooooooo GREAT DANGER *LOL* -- your choice of words invalidates your point. They have the "potential" for danger. You've conceding that you're full of crap and that you have no basis whatsoever to claim that a monopoly is dangerous. You can't give a single example, because they don't exist! So you copy out and make the basis claim that they have the "potential" for danger... about as much potential as a Tyrannosaurus Rex bursting through your bedroom wall and eating you.

Monopolies only have GREAT DANGER when they wield government power since the government can kill... which is actually greatly dangerous.

So know that hell you're talking about before you go around telling other people that they need to "better educate" themselves, especially when you invalidate your stupid argument in the very next sentence.